What To Do With One’s Money Part 2

It’s Monday morning – and though I’m long past the point where unprecedented, 24/7 money printing, market manipulation, and propaganda “surprises” me, it’s still difficult for my Spock-like brain to process the idiocy our “leaders” exhibit. Much less, how anyone still take seriously the financial “markets” that, for many years now, have as much semblance of freely-traded, price discovering mechanisms as apples do to oranges.

As you know, last week ended on an extremely sour note – with stocks and commodities plunging following the Fed’s decision to maintain zero interest rates. Moreover, they not only suggested the potential for “ZIRP to Infinity,” but potentially negativeinterest rates – which I have long claimed to be the most Precious Metal-bullish development imaginable. In fact, it was likely the first time “risk assets” plunged following a dovish FOMC policy statement – especially one that for most, was “unexpected.” In other words, shrilly screaming that the “end of belief Central banks can save us” is rapidly approaching, if not here already. Furthermore, interbank credit risk soared to a three-year high, and WTI crude’s plunge below $45/bbl sets up the energy sector for a catastrophic, bankruptcy-laced entrenchment. Moreover, despite utilization of every imaginable “capping algorithm,” gold and silver prices rose; yet again, violating “Cartel Rule #1” – i.e., “though shalt not allow PMs to rise whilst the “Dow Jones Propaganda Average” plunges.”

Emerging market currencies were hit hard again, with Brazil looking very much like a hyperinflationary crisis is looming – as in neighboring Venezuela; to a lesser extent Argentina; and inevitably, the entire global “emerging market” complex. Not to mention, supposedly “first world” Western nations, as they accelerate the “final currency war” I warned of nearly three years ago to unprecedentedly dangerous levels. Heck, on Friday alone, the Bank of England’s Chief Economist called for negative interest rates to “protect” the UK economy; whilst ECB board member Benoit Coeur not only elevated said currency war by suggesting increased QE – in espousing the ECB “can adapt its QE asset purchase program if downward risks to inflation entrench”; but specifically targeted the dollar as the Euro’s “enemy” – in stating (just before the FOMC decision) that “whatever the Fed decides, Eurozone and U.S. monetary policy are on very different paths.”

This weekend’s Moody’s downgrade of France, from Aa1 to Aa2 – following last weekend’s S&P downgrade of Japan, from AA- to A+; highlights just how dire the global financial situation has become. And consequently, how “QE to Infinity” is mere “inches” away, categorically speaking, from becoming “common knowledge” the world round. Thus, aside from the aforementioned “warning shots” from the Fed, the BOE, and the ECB on Friday alone – and I haven’t even mentioned the PBOC’s maniacal monetary easing and currency debasement – this weekend’s financial “headlines” include Goldman Sachs now forecasting the Fed’s first hike will be no earlier than “mid-2016”; Australia’s largest investment bank forecasting global “helicopter money” within 12-18 months; and “U.S. equity futures rise on renewed hope for more Japanese QE.”

Throw in this weekend’s pathetic Greek “snap elections”; in which the “anti-austerity” Syriza party maintained power, with the neo-Nazi “Golden Dawn” party placing third (following which, National Bank of Greece stock is trading at an all-time low), and you can see how precarious the global economic situation has become, and how closeunprecedented, global NIRP and QE are.

Which is why it’s utterly incredible to watch “them” go right back at it the second global markets opened today – from surging Dow (and French!) stock futures; to the 115th “Sunday Night Sentiment” paper PM raid in the past 118 weeks, and 513th “2:15 AM” paper raid in the past 587 trading days. That said, even I wasn’t prepared for the spectacle of idiocy, propaganda, and chaos CNBC hosted this morning, as the Fed’s “TV mouthpiece,” Steve Liesman, hosted an interview with St. Louis Fed President James Bullard.

Bullard was the lone dissenter in Thursday’s 9-1 FOMC decision to maintain ZIRP, having argued there was a “powerful case for raising rates”; so much so, he wanted to raise the Fed Funds rate, which has been at ZERO for seven years, by a whopping quarter percent. In fact, he had the gall to propagandize the Fed “should not consider market volatility” in its decisions – when less than a year ago, mere weeks before the Fed “ended QE” (LOL), Bullard personally responded to a measly 8% Dow decline by saying “a logical policy response at this juncture is to delay the end of QE”; and “if the market’s right, and this is portending something more serious for the U.S. economy, the committee would have an option of ramping up QE at that point.” Which, when coupled with blatant PPT “cooperation,” yielded an immediate market bottom.

That said, all’s clearly not harmonious in Fed/CNBC propaganda land; as whilst Bullard did his duty as the Fed’s current “bad cop” – in immediately re-igniting rate hike uncertainty, mere days after the Fed’s historically dovish statement – he simultaneously lashed out at the carnival barkers that have lost more money for investors than any in the history of the planet, in stating “the Fed cannot permanently raise stock prices, and having your friend Cramer cheerleading for lower rates 24 hours a day is unsavory.”

And there you have it. A Fed in complete disarray; a world on the verge of cumulative, but competing QE and NIRP to Infinity; and dissention within the halls of the “Ministry of Truth.” In other words, stay tuned for historic political, economic, and social fireworks in the coming months – as history’s largest, most destructive fiat Ponzi scheme is clearly on the precipice of collapse. And for gosh sake, PROTECT YOURSELF while you still can – financially and otherwise!

That said, the question of how to do so is the “64,000 fiat dollar question,” given how few viable choices are available – which I initially addressed in May’s “what to do with one’s money, part I,” but wanted to expand on today. Regarding stocks, bonds, and essentially all financial assets, investing in them is putting faith in the dying credibility – and waning “ammunition” – of Central banks and their “colleagues” in the government and “TBTF” banks. In other words, assuming they can levitate financial assets at all-time high valuations, amidst the worst economy of our lifetimes and worst financial situation ever. Not to mention, with the manipulated record low interest rates that provide “cover” for such ludicrous valuations having nowhere to go – certainly over the long-term, and potentially the short-term as well – but up.

As for “cash”; well, sure the “dollar” might rise against the Euro or Yen. But then again, when Whirlybird Janet inevitably reverses course and initiates NIRP and QE4, maybe it won’t. And either way, the dollar will ultimately decline against “items of real value” – like, for instance, historically suppressed gold and silver – once the “End Game” of Western currency destruction arrives. Either way, “cash” will be hyper-inflated by the Fed’s printing presses; and “too big to fail” notwithstanding, holding significant cash in banks invites a whole series of additional risks – like asset freezes and bail-ins.

Regarding hard assets, don’t forget for a second that only gold and silver are money; whilst all others are speculative investments. Unquestionably, gold and silver have a “floor value” in their cost of production; which as I have discussed ad nauseum, prices are well below today, making it all but certain that production will significantly decline in the coming years – as demand continues to dramatically rise, as Central banks hyper-inflate their currencies into oblivion.

This goes particularly for real estate; which was first propagandized as having nowhere to go but up during the early 2000s, despite Japan’s horrific experience of the prior two decades; and now, is being pitched as “safe,” despite the vast majority of global real estate markets having barely budged from their 2008-10 lows. In fact, here in the United States of Propaganda, the only real estate markets to have materially recovered are “1%” homes above $1 million in value. As for farmland, which many consider a safe – and even “prudent” – place to store one’s wealth, prices have commenced a significant contraction cycle, as agricultural commodities have collapsed amidst a blizzard of “sub-prime” farming debt.

As for those that believe mortgages will be “good” to have – and for that matter, any forms of debt – during the worst-case scenario of hyper-inflation, keep in mind that the deadly combination of “debt and hyperinflation” have never been friends to the borrower. Even in Weimar Germany, I might add, where the government arbitrarily decreed all mortgage payments to be indexed to hyperinflation. That is, for the precious few who had enough money to pay off even their hyper-inflated debts, given the scope of an horrific economic downturn that will easily be rivaled, and likely surpassed, by the global conflagration we are witnessing today – which I assure you, is just getting started.

From an investment perspective, nothingis more dangerous during times of crisis than illiquidity – and conversely, nothingmore valuable than liquidity. Regarding the former, nothing is more illiquid than real estate – particularly “less desirable” forms; and nothing more liquid than physical Precious Metals – which was proven during the “deflation” of the 1930s and financial crisis of 2008-09. And unquestionably, will be proven again in what might be the ugliest combination of “deflation” and hyperinflation ever – which in the coming years, will combine to attack global wealth in an unprecedented manner. This morning’s ugly Existing Home Sales data, depicting the biggest decline in seven months, certainly doesn’t make the real estate investment case any stronger. But again, this is just “jacks for starters” in the tottering real estate asset class – which unquestionably, will be hit just as hard in the coming years as following the last bubble peak in the mid-2000s.

9 Comments

RF
on September 21, 2015 at 1:37 pm

Andy,

Great update and thank you.

Listening to the Fed is like attending a clown show, or should I say “…Greatest BS Shown On Earth…”? When the Fed people speak they should be wearing those red clown noses. Then they would look the part !!!

With respect to Russia, China, India, and others buying gold, that sure is a lot of “pet rocks”. I guess the silly Americans don’t realize the value of gold pet rocks, or a least they won’t until it is too late.

When I got up this Monday morning and saw the DOW raising, I just had to laugh out loud. If any one, except the insiders, think they will make any money in the stock market; then they can not think clearly. Listening to those MSM liars will seperate you from you wealth and leaving you wondering what the hell happened!

I have noticed that it seems Americans have been trained to wait for someone else to make a decision for them and do their thinking for them. SAD SAD SAD

Watching what is happening in the world on a daily basis could be called “…As the stomach turns…”

Well, with all that said, please wake me up from my nap when the Fed actually raises interest rates. I can see its going to be a very long nap !!!

Frank
on September 21, 2015 at 1:51 pm

.. as we know Gold and Silver to be money, how is it in a deflationary scenario, if you have gold and no or just very little cash?
Once you want to buy some goods (bread, butter, jam, potato and steak 🙂 …
for if you have PM you might to be forced to change such against fiat under value, as a -hopefully – still stocked supermarket wont except PMs right?

Saying that cuz I am always very low on fiat putting such in PM and just a bit worried to be out of balance … but the prices are so tempting … you know?!

There is no such thing as “deflation” in a fiat currency regime – unlike the Gold Standard during the 30s. If, or should I say when, it all comes apart, no one will want dollars! Certainly, not with the current purchasing power. The Fed will destroy it.

Kevin
on September 21, 2015 at 5:06 pm

“Nothing is more illiquid than real estate”

That was the reason for me getting out of it circa 2005 and into pm’s. Sydney homes now start around 1,000,000. Looks like its going to go down over here but I’ve been saying that for years! Better 10 years too early than a few days too late right?

Norse
on September 21, 2015 at 9:44 pm

Getting back to the folks on CNBC, they drag some “” expert” out and say “Hey Joe, How you think things will go?” “OH Man”, Joe yells, Q4 will be booming & I see a huge Bull Market for the next 6 or 7 years!! ” And LQQKS in the camera & say’s “So but some stink stocks will ya”

My Jag needs some new tires.

E
on September 21, 2015 at 10:31 pm

Hi Andy,

Thank you very much for your work in educating and keeping people up to speed. I too think things are too unsustainable and will fall apart soon, but keeping with PCRs latest train of thought, really what’s to stop the fed from printing trillions and trillions out of thin air and buying up every stock and bond being dumped in order to keep ‘the system afloat’ for another ten years? Cheers

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